THE crisis in Nigeria’s energy sector is getting worse and tipping the nation to the edge of disaster. Oil theft, vandalism of production and distribution facilities, and the disappearance of revenues have put public finances in jeopardy and may yet derail infrastructure projects. Adding to the feeling of impending disaster is the apparent inability of the Federal Government to effectively combat sabotage or tidy up its messy management of oil revenues.
The signals of trouble are coming in cascades. Early this month, it was reported that expected revenues fell short by $4.8 billion or N769.2 billion in the first quarter of this year following a drop in crude oil production by 43.92 million barrels. Spending plans outlined in the 2014 budget thereby suffered a 20.4 per cent shortfall. In its Economic Report for Q1, the Central Bank of Nigeria said crude production, including condensates and natural gas, averaged 1.9 million barrels per day, a far cry from the budgeted 2.38mbd and the estimated 2.6mbd capacity. The 2014 federal budget is clearly precarious, as are the budgets of the 36 states, the Federal Capital Territory and the 774 local governments, which are also dependent on oil revenues for their survival.
For ordinary Nigerians, the business community and our trading partners, the shortfalls spell bad news indeed since our governments typically scale down or abandon capital projects entirely when revenues fall, while ensuring that nothing stops recurrent expenditure. With only N2.4 trillion accruing to the Federation Account, 11.76 per cent short of the projected N2.72 trillion for the quarter, and oil receipts accounting for 74.9 per cent of this, President Goodluck Jonathan should realise that it cannot be business as usual.
This over-reliance on oil is becoming more unsustainable by the day. Last week, the International Energy Agency declared that oil theft and vandalism in Nigeria had contributed to missed Organisation of Petroleum Exporting Countries’ production, export and price targets. Industry sources said Nigeria lost at least $12 billion to oil theft in 2013. Shell assessed its losses for that year at about $1 billion, while Agip said 60 per cent of its production in Nembe creek, Bayelsa State, was lost to thieves and vandals. The theft, which Chatham House, a British think tank, says has reached “industrial proportions,” is not new and has been extensively reported in local and international mass media. The stolen crude is sold openly in the international spot market and a smaller fraction refined in illegal refineries. The dynamics of the well-organised racket, involving large and small ocean-going vessels, barges and a network of participants – the barons, local operatives, security, especially military, personnel, bureaucrats and politicians – are also well documented.
What dismays Nigerians is the seeming helplessness of the government and its lack of strong will to take on the oil theft cartels even when the nation’s economic survival is clearly at risk. Already, all the three tiers of government have gone borrowing with total indebtedness of the federal and state governments, foreign and domestic, put at N10.16 trillion as of March 31 by the Debt Management Office. A government that cannot safeguard vital national assets and its economic lifeblood is unfit to remain in office.
The Federal Government has the necessary security apparatus to stop oil theft, using the coercive powers of the state. Jonathan is failing again, watching as up to 350,000 barrels or more are being stolen per day. The task requires more than rhetoric or tough talk. When he met with the Prime Minister of the Netherlands in March, Jonathan stated that $1 billion had been earmarked for a “comprehensive programme” to halt crude theft and asked for international assistance to stem the scourge, which he also linked to global terrorism. To demonstrate his sincerity, he should undertake a massive shake-up of the Navy and the Joint Military Task Force in the Niger Delta, some of whom are widely alleged to be neck-deep in the oil theft racket.
He should not hesitate to ask for the deployment of naval ships, surveillance marine and aerial craft and Special Forces from other countries. Our situation is critical and this is no time to pander to ignorant, vain and often self-serving sentiments of false national pride to disdain international assistance. We fumbled seriously by failing to call much earlier for a full-scale foreign assistance to crush terrorism and are now paying a heavy price; we should not repeat our folly.
But we will continue to be economically vulnerable unless we diversify our exports away from crude. The sharp reduction in crude exports to the United States, the entrance of new players in the crude export market, reduction in Chinese demand for crude, and emergence of new energy sources, point to a bleak future for any nation that remains dependent on oil. With the discovery of shale oil and increase in its domestic production to about 8.42mbd, the US that once bought 50 per cent of Nigeria’s crude, is now itself an exporter.
The government should stop advertising Nigeria as a failing state by firmly and decisively ending the brazen theft and vandalism. As in every other aspect of our national life, corruption in high places has hampered the fight against oil thieves.
The government should stop providing refuge for corrupt persons and root out the phenomenon firmly. It should hearken to repeated calls to open up the midstream and downstream oil and gas subsectors, railways and steel sectors by privatising all public assets in those sectors while implementing the reforms of the solid minerals sector enunciated nine years ago. These, along with new thinking in the agriculture and small and medium scale industrial sectors, will pull in considerable private investment, create jobs and diversify exports.